Well, they can’t. So let’s clear the air: there are no robots involved in online advice. At Invisor, and at other online investment management companies, we are human financial professionals that leverage technology to make your experience better, faster, and cheaper. In Canada, the online advice industry is continuing to grow, with eleven companies offering online investment management services. You can learn more about them in Rob Carrick’s 2016 robo-advisor guide.
Most online advisors are registered as Portfolio Managers, i.e. the highest level of registration granted by securities regulators. This makes us legally obligated to work in the best interest of our clients. We’re required to have specific qualifications (typically CFA or CIM) with years of relevant experience before we’re granted registration. So we’re not incented to ‘sell’ investment products to you to earn a commission; we'd earn a fee directly for the services we provide.
Here are five (major) benefits of working with an online investment advisor.
1. You can get started when you're ready
You shouldn’t have to save to be able to invest. With Invisor, you can do both at the same time by opening an account with as little as $100 (or less), and making the commitment to save regularly. Remember to pay yourself first when you get your paycheck. We promise you no amount is too small, and all your contributions will add up over time. The key is to get started as early as you can, with as much as you can, so you can take advantage of the power of compound interest.
2. Your portfolios are fully managed for you by your online advisor
When you open an account with Invisor, you’ll get a personalized investment plan to help you reach your goal. Your advisor will then manage your diversified portfolio to minimize risk and maximize your savings, so all of your eggs aren’t in one basket. This will include automatic account rebalancing when your portfolio drifts away from plan, and adjusting the risk level in your portfolio as you get closer to achieving your goal.
With this model, you can focus on saving more while an investment advisor manages your money in your best interest. It’s totally hands-off for you, which means your emotions will be separate from your investing decisions; a.k.a. we’ll make sure decisions aren’t based on reactions to what’s going on in the market, but with your long-term goals in mind.
3. You'll lower your cost to a fraction of what you might be paying now
Mutual funds in Canada are one of the most expensive in the world, with an average equity mutual fund costing 2.35% every year (Sourse: Morningstar Report). This is especially significant in a low-growth, low-return economic environment where earning a 5 to 6% return is typically challenging.
By working with an online investment advisor, total costs of investing are approximately 0.70%; this is less than a third of a typical equity mutual fund. This means more of your money is invested towards your goals, which could add 30 to 40% more to your nest egg over time.
4. You can contact your online investment advisor at your convenience
Say goodbye to stacks of paper and lengthy appointments! With an online advisor, you can have your account up and running in a matter of minutes, all wrapped up in a convenient digital experience. Throughout the account opening experience, and as long as you’re a client, an advisor is always a call or click away.
5. Your money is secure, with full transparency 24/7
Your account is held in your name with a registered third party custodian, and is covered under the Canadian Investor Protection Fund within specified limits.
A secure dashboard gives you full transparency on your holdings, performance, costs, and how you’re progressing towards your goal. So you’re never in the dark about what’s going on with your investments. Plus, you can access your account from anywhere, like the coffee shop on the corner, the airport while you’re waiting for a flight, or the hockey rink during your kid’s practice.
Up until recently, portfolio management as a service was only available to the ‘rich.’ Take advantage of online advisors that make investing available to all Canadians, and watch your savings grow faster. But, like with anything else you buy, it’s best to do your homework before choosing an online investment advisor. To get you started, here are 5 questions you should ask a potential online advisor.